Recommendations released by the Task Force on Climate-related Financial Disclosures (TCFD), a private sector taskforce set up under the remit of the G20 and the Financial Stability Board (FSB), could represent a seminal moment in global efforts to address climate change.
Commenting on the report, Jon Williams, PwC partner and a member of the TCFD, explained why it is likely to change the way businesses view risk:
“It’s abundantly clear that climate risk reporting is no longer simply a Corporate Social Responsibility (CSR) issue – it’s a business imperative which needs financial analysis that should sit in organisations’ financial reports.
“While the recommendations in the Task Force report are voluntary, it’s likely that the pressure on industry sectors to start investing in their carbon risk management process will quickly ramp up. A key driver will be the power of the market, and more precisely that of investors, who are set to win or lose based on the decisions they make in respect of the companies they invest in, and how these companies in turn manage the physical and transition risks - and opportunities - arising from climate change.
“While this will undoubtedly have profound strategic, governance, systems and procurement implications for business, the Task Force recommendations provide a robust framework that will guide them as they navigate the road ahead and adjust to this new normal.”
The recommendations outlined in the report, which was drafted in under a year by 32 private sector individuals, cover the broad areas of how boards and management govern climate change and how they integrate it into their strategy, businesses, financial plans and risk management. It also asks that companies disclose various metrics and targets relating to climate change, ranging from carbon emissions to executive remuneration.
Perhaps the most innovative aspect is the proposal that companies consider how their businesses will fare under different climate scenarios, including the 2oC outcome that the Paris Agreement seeks to meet.
Bob Moritz, PwC’s global chairman, commented:
“As business leaders, we have an important role to play in ensuring transparency around climate-related risks and opportunities, and I encourage a united effort to improve disclosure across sectors and regions.
“The Task Force’s recommendations will lead to more consistent, comparable and reliable disclosure of climate-related information. This should enable better informed decision-making on business and investments.”
The TCFD report recommendations can be found here.
The Task Force on Climate-related Financial Disclosures (TCFD), chaired by Michael R. Bloomberg, was established by the Financial Stability Board in December 2015 to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. The 32 industry members of the Task Force, who are drawn from a wide range of industries and countries from around the globe, finalised the recommendations after extensive public engagement and consultation, including public consultation on a draft of the recommendations in December 2016.
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